I'm going to respond in detail to your questions but I have limited time today. It is the first Friday of the month and I go to my local 2600 meeting. I just mention this so that you know if I disappear, I'll be back tomorrow.

Second I want to start of with a little preamble to say, I'm going to call some things "my ideas" but only to distinguish the concept from previous things we've talked about. However, I don't personally consider any of these things "my" ideas. You claimed, "it was possible" to do these things, I just presumed your were correct. My goal was/is to understand how you are correct.

So in pursuing my personal understanding of your correctness, I obviously disregarded anything you said that I already knew to be a false path. I just presumed it was miscommunication on your part or misunderstanding on my part. I then asked questions and tossed the concepts around in my head until I could figure out what your path really was. I hate it when somebody claims to know something is provably true, when I can't prove it to be true. I'd long given up on proving this was possible. I never proved it was impossible. It seemed possible. But I never noticed a plausible path to proving it was possible. As such, if we manage to prove stable money as being possible, I claim that it is just the natural termination to the path you started down. Hence, "your" idea.

Really, we agree on about 90% of our principles. The 10% we disagree on is worth arguing over though.


I'm not saying I have an "attack" on your system. I'm saying that the electrically efficient hashers driving out the electrically inefficient is a natural consequence of your design. It is a natural consequence of my design too. Electrical efficiency is not something either of us can detect, so it is not something we have any power to prevent.

It is analogous to bitcoin, except there the temporally efficient (faster) hashers drove out the inefficient. There was no way to prevent that, so satoshi made it a feature.


I don't know what this means, so I don't know how to respond.


My use of ROI was probably too smug. But let me be clear this is a closed system. The number of dollars going out of the system, cannot be greater than the number of dollars going into the system. It doesn't matter what happens in between.

Let's say buyers have $10,000 to spend buying ENC.

Now lets say there are 1,000 peers who burn 200W*24hours*30days. That's 144,000 kwh or about $14,400 to the electic company. Or about $14/peer say we want to give each peer $5 on average for their trouble. 35% ROI. Now we have $19,400/month in costs to run the system. That means minting somewhere near 20,000 ENC. So the price will be $1 = 1 ENC.

So the peers take these coins to the exchange and get... $10,000. Because that is all the dollars there are.

You can say 500 peers sold 20 ENC each for cost+ROI=$19.40 (after transaction fees), and the other 500 have to wait to pay their electric bills. Or 1000 peers sold 10 ENC each for $9.70 and nobody can pay their $14.40 electric bills. That doesn't change the fact that the electric company is still going to want their money, and they can't take it in ENC.

(You have the same potential problem with gold. If I spend $1,000,000 in electricity mining gold. And buyers want to buy $500,000 worth of gold. Then the electric company is still going to be just as pissed.)

The bigger problem is, that out of $10,000 exchanged for ENC, there are zero dollars left for merchants to exchange for, once purchasers have spent their 10,000 ENC. All the liquid dollars have gone to the electric company.

----

I'm not trying to say anything really earth shaking or dramatic.

I'm just saying that 1,000 non-minting peers who burn an extra 5W*24hours*30days (running this app in the background like bittorrent while doing other things). Comes to about 36 cents each. This can go without reimbursement.

Say 10 committed competing arbitragers running 500W only when profitable, say 6hours*15days when things are stable. That is 450kwh or about $4.50 in overhead (45 cents each)

So out of $10,000 exchanged for ENC, the arbitragers take $4.50 to cover their overhead. Then they take $50 each as 10X ROI. But this still leaves $9,495.50 not permanently extracted from the system.

----

Yes I realize this example is contrived, and maybe you can poke fun at different non-sensical bits. But the main point is, every dollar that goes to minters, comes from the pocket of someone buying ENC on an exchange. Those dollars will never be available to swap on the exchange again.

I know there is a little multiway exchange diagram somewhere that shows this problem.

Alice has an Apple but wants a Banana
Bob has a Banana but wants a Caramel
Carl has a Caramel but wants a Dollar
Don has a Dollar but wants an Apple

So Don give he dollar to the electric company in exchange for an ENC.
Carl says, "Hey WTF! I needed that dollar! And eats his caramel.
Bob says, "Hey I wanted that caramel, and punches Carl.
Who slips on the loose banana and falls into Alice,
distracting her just long enough for Don to grab her Apple and run like hell!

---

So in summary

$14,400 fixed cost, bad
$364.50 fixed cost, better
$4.50 fixed out of pocket, best

$5,000 @ $5 each profit, expensive and not so motivating.
$500 @ $50 each profit, cheeper and more motivating.

---

Yes, somewhere during that post I lost my mind. I'll respond more coherently to the rest of your post tomorrow.

And Yes, I'll put my concepts up and let you poke holes in them. I'm pretty sure there are a few unexpected consequences I haven't noticed. I am a little disappointed no body else pinged me to do so from the other thread. Maybe we are alone.
 

http://www.adbusters.org/blogs/adbusters-blog/anonymous-joins-occupywallstreet.html

Really, I didn't make up the "one demand" rule. It was part of the protest from the beginning. They didn't know what it would be when they started. They still don't know what it is.

At least the Tea Party guys had demands like, "Write the laws down BEFORE you vote on them, so everyone can actually read what they are supporting or opposing."

But not these guys. They want undying loyalty before they even decide what want. I don't know if I can get behind them yet. Maybe their demand is Obama start killing kittens? I simply have no idea.

Agreed. That was what I proposed.

Agreed. That was why I make it clear most people wouldn't be minting or benefiting from minting. It is a pure, stable, medium of exchange.

Agreed. That's why we should involve as few people as possible in that cluster fuck. That's why I said only "Smart" gamblers will take part in arbitrage. "Dumb" gamblers are welcome to try, however their dollar losses need not be born by aunt J. Dumb gamblers should pay their own bills.

Clients don't even have to know the arbitrage process is going on. Hell it happens everyday with dollars/gold/etc and I pay zero attention to who is winning and who is losing their arbitrage positions.


Stable money is a benefit to everyone. Making the currency stable should cost everyone as little as possible. Every penny that goes to the electric company is overhead that comes out of sellers, traders, hoarders, savers, spenders, and aunt J's pockets. None of it, in your model is intended to come out of the minter's pocket. Instead, everyone else's overhead, becomes the minter's ROI.

This is true in my model as well. But my model works to minimize the number of dollars that goes to the electric company. Therefore it minimizes the overhead charged to sellers, traders, hoarders, savers, spenders, and aunt J's.

Actually I wasn't going to bother since there is so little interest here. But I checked the survey results on Suggester's poll and 26% of the people support his proposal and 10% partially support him. That is 36% interest in stable money. I guess I will start a thread.

Funny? Why do you think all these people are not interested in you?


Yeah, it is going to come as a real shock to bitcoiners that a small group of people, make control and distribute their money supply! Most of the posts on this forum are from people who are in that group or want to be in that group.

P2P means peer to peer. Anyone in my system can be a peer. Anyone can be a trusted peer. They just can't be an "anonymous trusted peer". As you pointed out, that concept is just stupid. Anyone can however mint all the coins they want. Even anonymously! But only the ones who are both smart and efficient will be able to do so profitably.

Which is as it should be. Because only a complete moron thinks you should penalize the smart and efficient, to benefit the stupid and inefficient. That is the closest thing this site has to a core principle.

Woot! One more!

That makes at least 5 people who have shown up and expressed support for stable money. I think if we get two or three more we can take a shot at occupying wall street!

But seriously, Suggester. Thanks for joining the discussion!

There is a third premise that was explicit in bitcoin.
3. Fixed monetary policy

It was that third premise that represents the "soul" of this community.

There used to be a currency called the Drachma that represented the soul of one community. A currency called the Deutsche Mark that represented the soul of another community. Then someone suggested, "Wouldn't it be better if we created one currency that represented our combined souls?"

Turns out the answer was, "No. Probably not."

Some concepts have to compete. True can't collaborate with False by settling on Maybe. Or in answer to a famous question, "No, we can't all just get along."

This is a nasty sounding, but pretty fair summary of what I am suggesting.

Arbitragers will compete, not on how fast they can hash, but on how cheaply they can hash. The arbitrager with the lowest overhead wins. The mathematics of the minting algorithms prevent even the last rogue minter from driving the system away from stability.

If the latter holds. The former is always perfectly sensible. Otherwise, you are arguing to allow others to do exactly the same job, but at a higher cost. As all electrical costs are directly born by clients transacting in the *coins, minimizing this overhead expense benefits everyone.

Anyone is allowed to mint. However, the vast majority of people using this system won't mint, and won't want to mint. The arbitrage competition requires too much *human* mental effort, and it requires gambling with ones personal dollars.

However, as with bitcoin, anyone can run a client which keep tabs on the honesty of the rest of the network. These clients require trivial hardware to run and very little electricity. Absent all the needless hashing, monitoring honesty is a trivial problem.



This however is not a correct summary for any reasonable definition of "secure the network". I claim that security will be provided (as it is with bitcoin) by cryptography. This prevents all theft, fraud, forgery and transaction related mischief. Denial of service (preventing valid transactions from being acknowledged) and history substitution (chain swapping) is not subject to the minters at all.

Network continuity, and denial of service prevention become the responsibility of those non-anonymous parties that profit in the actual *coin marketplace. However, it is never compromised by 51% attacks. Denial of service/history modification requires 100% consensus among well known non-anonymous parties that can be held legally responsible for their actions.

So, I claim if even 99% of non-anonymous parties attempt to block valid transactions or change history, the last 1% has 100% of the evidence necessary to file charges against (or publicly disgrace) the others. Even if 100% of non-anonymous parties are compromised, every anonymous monitor holds the same evidence.

That is what I call "security".

They promised to make "one demand" of President Obama. They said they would figure out what that one demand was once they all got together.

I'm still waiting.

I saw two separate proposals in the forum with tens of demands each. One was laughable. (Forgive all loans on the planet) The other had some sense to it. (Repeal this specific piece of legislation.)

Until they can decide who they are, I'll just continue to giggle at the performance artist trying to be taken seriously.

This seems very similar to what Etlase2 is trying to design for EnCoin.

I'm absolutely sure the coin price (equals) and absolute quantity of electricity argument is impossible to implement. (Feel free to see that and the previous EnCoin thread for details of why.)

However,


In the process, I identified (the beginnings of) a pretty trivial mechanism for keeping *coin prices stable. It uses the price of electricity as a constraint. It has varying minting based upon economic changes.

I don't want to deliberately sidetrack Etlase2 threads. But if there is interest, I don't mind starting a new thread to discuss the feasibility of the concept.

This post has a brief summary.
This post gives a few more details.

I'm not saying this exact idea is finished or perfect. I noticed few unintentional flaws in the details myself. But if anyone is willing to discuss the plausibility of creating stable *coins using a variant of this mechanism, then give me a ping in PM.

If you want me to understand that a fixed number of coins and depreciating prices are better... Trust me, I've already heard you! Nothing to see here. Move along...

Awesome post BubbleBoy! I'm going to jumble the order of some of your quotes so I can clearly delineate where I am in agreement and disagreement with the EnCoin concept.



I totally agree with you. Which is odd, because it clearly I'm saying something that seems very close to the opposite!

The part I'm agreeing with is 1 *coin should *not* be pegged at 10 KWH as EnCoin suggests. Specifically, by requiring each coin to represent burning an average of 10 KWH. I find that impossible for the same reasons you do. What I'm saying is, electricity is the only commodity I've noticed that has even the potential to become a tool for stabilizing *coin prices.

Electricity has one unique characteristic. As Etlase2 points out, we can require someone to purchase at least some energy prior to creating a new *coin. This means the coiner has "skin in the game" prior to creating/selling coins. I don't see any other basket of goods that has these characteristics. I can't force someone to burn wheat in the process of manufacturing a *coin.

The question then shifts to how much electricity do we need to require at this moment? While it is impossible to determine exactly how much any particular person must purchase, fortunately, it is possilble to dictate that they purchase more relatively speaking or less than was required in the previous period. (Changing difficulty)



I totally agree with these statements. Both would be bad and should be avoided.

What I'm proposing is the (coin/kwh) requirement is constantly changing algorithmically based upon market conditions and the demonstrated need for new coins. The price of electicity serves as a limit constraining two non-linear functions. The (coin/$) exchange rate and the (kwh/$) exchange rate.

Again, even that sounds impossible. But, here is the edge.

I'm not suggesting the algorithm dictates when coins must be made. That remains a human decision. Human's make coins when Arbitrage between (coin/$) and (kwh/$) makes it profitable to do so.

In a stable economy with a *coin price at a stable equilibrium, there is ZERO need to create new coins. Therefore, the proposed algorithm must give zero incentive to creating new coins. At this point 1 Coin = X kwh and there is no arbitrage profit. An algorithm CAN monitor the lack of coin creation.

If the economy is increasing (more $ of goods to trade), then the (coin/$) relationship will vary from the (kwh/$) relationship. This creates arbitrage incentive to create new coins. An algorithm CAN monitor demonstrated coin creation.

If the economy is decreasing (less $ of goods to trade), then the (coin/$) relationship will vary from the (kwh/$) relationship. This creates an incentive destroy coins and/or discourage selling coins. I propose a transaction TAX burning coins for this. Again, an algorithm CAN monitor coin destruction.

I proposed the beginnings of an algorithm in a prior thread. But the gist goes.

If people are minting excess coins, then make it more expensive to mint coins. (increasing economy)
If people are being taxed, then make it cheaper to mint coins. (decreasing economy)
If people want to mint just enough coins to rebate their tax, let them. (stable economy)



I totally agree with you. I'm suggesting competition between arbitragers to monitor the market and keep prices stable. This is the opposite of "Everyone can run minting in the background without thinking about it."



Totally agreed. In this model I want to minimize the number of people who have to burn needless electricity. That is just unnecessary added overhead to the *coin economy. Only arbitragers would need to solve proof-of-work problems. And then, only when they see it as profitable to do so.

--- Note ---

If electricity prices vary dramatically, or even if the economy varies dramatically (Walmart accepts coins), then coin/kwh relationship we move from the previous equilibrium.

The goal for the system, is to assure that it always moves to a new stable equilibrium rather than tending to zero or infinity.

I'll admit the previous post was lame. I was a little defensive when I should have read a little further into your post.

Suppose that 6950 equilibrium comes at our long coveted 1 ENC = $1 = 10 kwh
Did you work through the math?

6950 sells coins at $1 with a cost of $1 for a net of 0.
Altera sells coins at $1 with a cost of $0.10 for a net of 90 cents per coin.

Even if the sell price goes up. And the 6950 begins minting 5 coins for each 1 Altera mints. Until the ENC price reaches $1.23, the Altera still generates more proft on its one coin, than the 6950 generates on its 5.


More than you might think!


I'm sure 90 cents on each generated coin will pay back even a $600 machine pretty quick. Much faster than the nickels you keep mentioning.

I was going to make that point but realized I didn't have to. The Altera is supported by every other GPU that is even a little more energy efficient than the 6950. The chart shows lots of possibilities.

And Altera and company don't have to keep driving the ENC market price down at the velocity the 6950's were driving it down at. They just have to hold it down. Its much easier to drown someone if they're already underwater.

And as you obviously know, all that fee money has to go somewhere. Now it is going to the most efficient where it belongs. The irony is, to bring the 6950s back to profitability, you have to increase the difficulty while the market is stable. This increase is only to drive out electrically efficiency and add overhead. Sounds totally sensible.

I have to admit, I don't even know. Too much cut and paste and bleary eyes. But too many little boxes for me to dig through and find a different example. But it doesn't matter! I don't have to match the 6950 in Mhash/s.

(I don't really remember any of the details for "minimum requirements" to maintain your reputation and assure your spot in the minting pool. But I think it was generate at least one FNBlock a day.)

Say when ENC hits "6950 equilibrium", the 6950 is generating 5 blocks a day and the Altera is generating 1 block a day. Now the (ENC_price - 6950_cost_to_produce) = 0. The 6950's ROI is zero. It has to stop minting or continue at a loss.

This is your intended behavior, nothing more. I'm not making any wild claims.

The Altera on the other hand is still profitable at 1 block a day. It can keep minting. So can all the other Altera equivalents. They are 10x more efficient than the 6950. From this moment on they continue earning a ROI.

If there are enough Altera equivalent peers to hold the price steady, just below the 6950's break even, the 6950 peers are for all intents an purposes dead. They don't have to be 10x more efficient. 2x is probably enough.

Altera EP4CE115C7   80 Mhash/s 18.18 Mhash/J   $299 academic
6950      0.336062 Mhash/s   1.8 Mhash/J  $250

The Altera does 18.18 Mhash/(watt second) = 65,448,000 Mhash/kwh
The 6950   does  1.8 Mhash/(watt second) = 6,480,000 Mhash/kwh

The Altera is 10 times more energy efficient than the 6950. Both cost less than $300
The Altera is 240 times faster than the 6950.

The Altera doesn't have to produce 240 times as many coins as the 6950 thus burning more total dollars.
It can simply produce 10 times more for equal dollars and loaf.
Or it can an equal number of coins for 1/10 the price and loaf.

The Altera has the choice to decide what is the most profitable way to run the 6950 out of business. It just watches the ENC sell price fall until the 6950 quits. That means as you pointed out that:
ENC price = 6950 cost to product
ENC price = (10x) the Altera's cost to produce.

Now at this point, the Altera doesn't have to be a total dumbshit and mint until the coins fall to ENC/10. Or show off and invite everyone else into his game. He just holds the prices steady making maximum profit, while telling everyone else, he's losing money for the good of the network.

Still don't get it?

The whole point of the system is to reach price equilibrium. This is exactly what would happen if every node was a 6950. ENC would reach the exact same price. Lots of people would mint a little and sell them off. Sometimes they'd make money and the ENC price would fall. Sometimes they lose money and the ENC price falls.

The Altera just makes money every time. As a side effect everyone else makes less, without the ability to know they could be doing better. The Altera guy could just be a better market timer than them. He's certainly not doing anything crazy looking.

If they upgrade and mint faster, everyone will upgrade and what good would that be? Just more sunk costs for everyone and no more profit to offset it. Better to stick with Ryan's original plan.

I deliberately ignore them because they have no bearing on any of my mathematical arguments. I could just have as easily said, talk 20 outdated old PC I got for free, and outsourced the hashing. Or created a botnet and outsourced the hashing.

You're answer is always, "Yeah, but everyone's going to notice. Then they'll all start doing it too! Inflation will start. Everyone will decide inflation is bad, so will will agree to increase the difficulty. So there!"


I clearly demonstrated how they are not REQUIRED to "benefit others as well." You did not refute my point.


Again, you just said, "Of course everyone will take the path that's least profitable to themselves. How could they not want to maximize their momentary gains while sabotaging their long term profitability?"


But what you fail to acknowledge is you've just run all the machines off the network that you designed the network for. Now you have a network of people who understand the benefit of minimizing hashes/watt. All secretly competing to minimize their hashes/watt cost.

That was what I have tried to explain from the beginning. You simply cannot algorithmically force the efficient to subsidize the inefficient. That has to be done at the point of a gun.



You took the word right out of my mouth! If you wouldn't mind, why don't you invite some of your IRC friends here to critique my density!

----

I know you addressed the FreeNet Sybil problem by adding a fee to create FNs. I'm assuming you've already solved the Peer Sybil problem.

I'm sure you already noticed that in the grand scheme of things, it is trivial for one computer to serve as a FN Peer to multiple FreeNets simultaneously. Most of the work is completely redundant. If I'm receiving transactions, validating them, and signing them with one FN key. Then it is no more bother to sign the blocks as a representative of 10 different FNs. The additional broadcasting is really not a barrier with today's bandwidth.

The only thing that can't be done simultaneously is hashing at 100% cpu power for each network. However, I've clearly shown that is not required.

I could take my one already efficient machine (or plug plus an outsourced hashing rig) and create 10 virtual machines. Each would hash at 2mh/s and claim to running at 220W (or whatever the minimum requirement). Then I would be the someone in your, "subsidizing someone getting 2mh/s for 220W" example. But Woot! I would be getting whatever subsidy you are proposing ten times over!

---

What if I did that with my 10 plug computers creating 1,000 virtual peers for $1,000 and then outsourced hashing to one of those big bitcoin rigs looking for a little steady revenue. I'd fake being 1,000 slow peers and take the subsidies you propose from the others greedy supercomputers.

Then if word got out, people would compete with me by faking having the most slow inefficient boxes! How perverse! We'd be 3 guys with 30 plugs, simulating 3000 crappy peers taking subsidies from 3000 slightly above average peers. All while paying off one high-end bitcoin GPU rig to do as little hashing for us as we could get away with.

You are correct, in your edit. It is still the same problem even with different starting conditions.

I guess it doesn't matter what "best hash value" means, since you claim it is equally distributed "per motherfricken block".

You claim the supercomputer would dominate because it did more hashes than the other machines over the same period of time. To rectify this problem, you want the super computer to do only the same amount of work as the others, or give away its excess effort to the others. We both agree that the super computer wouldn't want to do that.

You claim, therefore, there will be no supercomputers.

I claim, if the supercomputer is more efficient in hashes/W, it will simply just do the average hash rate for multiple networks simultaneously. Thus avoiding your penalty. I could run a hundred nodes on 5W plug computers doing all the network stuff. Then have each plug outsource the hashing to one supercomputer in China that works cheap.

You can't detect this. Nor can you prevent it. Nor as it seems, can you see it.

This is called an "isolation" attack. Yes, it should be prevented if reasonably plausible, but it is in a completely different class from the rest of the discussion. It fits more in with DNS spoofing, or fishing attacks.

If I can surround a "dumb" client completely I can lie to that client sure. But I still shouldn't be able to man-in-the-middle that client by redirecting his transactions to different accounts. At least not while I'm talking to others.

I think IRC is just making life harder for you. What IRC channel is it by the way?

You declared the improper forking. You are coordinating a "better release" that everyone will be required to adopt. I'm not sure which fork your release blesses, but your team got to make that decision. As Larry Lessig is fond of saying, "Code is Law".

That is all I mean by center of the universe.

Understandably, from the point of view of *coins as crypto-anarchist currencies, this would seem initially distasteful.

However, it is important to note that it *never* makes sense for two different exchanges to trade on different forks. They will always have to take a break from trading to determine which is the correct fork to continue trading on.

Otherwise, forking effectively doubles the number of coins in existence. Bitcoin hoarders pray for that to happen. It never will. Imagine if the chain forked and Euros traded on one branch and Dollars on the other. I could sell my pre-fork coins once for Dollars and again for Euros. Woot!

Not going to happen.

So the reality is, if you chose to continue the fork without the exchanges. You are in the same boat. You have just create a new currency pre-distributed to everyone who also owned *coins before the fork. That is just bad business. You would deserve what you get.

If an exchange got hacked and tried to fork the chain, all the other exchanges would notice, stop, and gather together to repeat the above exercise. Most likely the hacked exchange would be forced back to the consensus branch and be required to repair any client damage. Otherwise they would be bankrupted and sued.

It is an ironic fact, that even in crypto-anarchist currencies, there is a center of the universe. For Fairbrix at this moment, it is michaelmclees. Later it will be the exchanges.